DUBAI – Saudi Arabian Mining is weighing a plan to raise as much as $5-billion through a rights offering that could be the biggest since mid-2018, according to people with knowledge of the matter. The shares slumped.

The company, also known as Maaden, is working with HSBC Holdings’ Saudi Arabia unit on the possible offering that could happen later this year, some of the people said, asking not to be identified because the information is private. The size of the rights issue hasn’t been finalised and could end up being smaller, they said.

The Public Investment Fund, which owns a 65% stake in the mining firm, would also participate in the rights issue through a debt-for-equity swap and exchange its loans to Maaden subsidiaries into equity, the people said.

Maaden shares declined as much as 10% on Monday to 44.8 riyals, the most on an intraday basis since December 2014.

‘A BIT NERVOUS’

“With the potential for some dilution from the rights issue, a lack of specific plans to use the funds and the potential for Maaden to overspend on one of these acquisitions, it appears the market has gotten a bit nervous,” Yousef Husseini, an equities analyst at EFG-Hermes, said in an email.

At $5-billion, the offering would be the largest since Bayer raised $7-billion last June, according to data compiled by Bloomberg. It would also be the Middle East’s largest for at least the past 10 years, the data show.

NATIONAL CHAMPION

Maaden, a so-called national champion in the kingdom’s economic diversification plan, has been looking for possible takeover targets, CEO Darren Davis said in an interview in April. The company is working with financial advisers including Michael Klein and JPMorgan Chase & Co. as it scouts for potential acquisitions, people familiar with the matter said in July.

As well as its global ambitions, Maaden is also looking to expand domestically as the kingdom seeks to exploit an estimated $1.3-trillion of metals and mineral deposits. The company wants to more than double gold output within five years, according to Davis. It also plans to boost its exploration budget to 250-million riyals this year, about triple the annual spending of the past decade.

Maaden, PIF and HSBC’s Saudi Arabia unit all declined to comment.